What you should teach your kid about money and at what age

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Before beginning the journey of financial education for your kids, you need to make sure that you are patient with them. (Thinkstock) Before beginning the journey of financial education for your kids, you need to make sure that you are patient with them. (Thinkstock)
SummaryBefore beginning the journey of financial education for your kids, you need to make sure that you are patient with them.

They understand that money is valuable and should be used carefully to get essential things. Teach your kids how to save and estimate the value of things. The first lesson would be to give your kid a certain amount of money every month similar to pocket money. If your kid demands a new toy, ask them to save the pocket money for a few months and only then will he or she get the toy. This way your child will learn to save and understand that everything cannot be bought by thinking impulsively. Every financial decision needs to be planned and then taken into account. You can also give examples from real life or some stories that the kid understands. Explain to them the differences between investments and savings. A kid should also understand the difference between necessary expenditures and luxury expenditures. For example, purchase of groceries every month is a routine expenditure and is a necessity as you need food to eat. However, going on a vacation is luxury expenditure as it is not critical for living. Such real life examples make your kid understand such complex concepts better.

Ages 10-13: This age band is when the kid is entering his teens and is keen on learning new things and experimenting every day. You should now introduce him to the basic ideas of debt and investments. Explain what a savings account is, why the account earns interest and how investments are brought about. Explain the ways these accounts can be used for future goals or how saving is essential to support the family in times of crisis. Don’t expect the kid to get every tiny detail of how to run these accounts, but the basic idea should be understood. You can also try to begin the education of compulsory payments to be made every month. For example lend them some money for their basic needs every month and deduct a certain sum of money as maintenance costs, which can be tantamount to EMI payments. Also, explain the difference between savings and debt. You don’t need to expect them to understand the exact workings of credit cards or loans. However, the simple idea that when you pay by credit card today, you should repay this tomorrow should be understood by them. Tell them that exceeding limits on a credit card or not paying your bills and loans on time can

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